Future of Allo Protocol - What’s Next?
TL;DR: While Allo Protocol has enabled innovative contributions, its complexity, high development costs, and rapid technological changes have led us to pause further development and refocus on the category of next-gen capital allocation.
Celebrating Progress
First, it’s important to recognize and celebrate the remarkable dapps built on top of the Allo Protocol so far. From innovative pools to standardized interfaces across diverse allocation mechanisms, the community has shown incredible creativity and resourcefulness in utilizing and expanding the protocol.
Strategic Shift
Since its spinout, allo.capital has experienced steady interest. However, our primary focus has been on exploring and developing understanding of the design space of next-generation capital allocation methods broadly, rather than specifically improving or expanding the Allo Protocol.
This strategic decision was guided by our belief that our past approaches were too solutionist - and too clustered around Quadratic Funding. Understanding the future of capital allocation in decentralized ecosystems demands a focus on the problems and the people who have them.
Strengths and Challenges
Allo Protocol undeniably excels in several critical areas—most notably, pool creation and providing standardized interfaces that simplify the implementation of diverse allocation mechanisms. These features have proven highly valuable for those well-acquainted with the protocol’s operations.
However, despite these strengths, we’ve encountered significant hurdles. The inherent complexity of Allo Protocol has been a notable barrier to entry for many users. The steep onboarding curve and complex user interface often discouraged new participants, limiting widespread adoption. Additionally, functionality that the market demanded (1) a la carte usage of the modules, (2) functionality for generating straightforward UI/UX for applications, was notably lacking. This gap made it increasingly challenging for developers to quickly prototype and launch intuitive interfaces for their users that would get adoption.
Technological Evolution and Financial Viability
The technological landscape has also rapidly evolved. Innovations in AI and vibecoding have fundamentally changed how quickly and efficiently new dApps and protocols can be developed. These advancements have dramatically reduced the value proposition of a dedicated solution like Allo Protocol, whose initial attraction was standardizing complex funding mechanisms. In an environment where developers can effortlessly deploy bespoke capital allocation mechanisms with AI-driven coding, Allo Protocol’s role as a necessary middleware becomes less clear.
Furthermore, the financial viability of continued protocol development has become a pressing concern. The high costs associated with maintaining and upgrading the Allo Protocol while it was incubated at Gitcoin—often running between $20,000 and $60,000 per month for development, coupled with prolonged timelines of six months for upgrades and another six months for security audits—are prohibitive. Customer resistance to activating fees further compounds the challenge, limiting the sustainability of funding such expensive operational and developmental overheads.
A detailed summary of these points can be found in the recent governance discussion: Allo 2.1 => 2.2.
Pros & Cons To Maintaining Allo Protocol
Pros
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Battle-Tested Infrastructure: Allo Protocol has proven itself as a modular, reusable framework for onchain capital allocation. For advanced users, it continues to provide a reliable and flexible foundation to stand up capital allocation mechanisms quickly.
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Ecosystem Familiarity: Many builders, especially within the Gitcoin and Grants Stack ecosystems, already understand how to interface with Allo. This familiarity lowers switching costs and creates continuity.
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Standardization Potential: In a fragmented design space, Allo offers a shared language and architecture for allocation logic. Standard interfaces make it easier for downstream tooling, dashboards, and analytics to interoperate across funding mechanisms.
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Composable by Design: The protocol’s architecture allows mechanisms like QF, direct grants, and milestone-based funding to share common infrastructure (e.g., registry, payouts), reducing duplication of effort.
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Credible Neutrality: As a protocol, Allo allows communities to coordinate without privileging any single allocator or UX paradigm—an asset in pluralistic ecosystems.
Cons
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High Maintenance Costs: Protocol development and auditing have been prohibitively expensive—often exceeding $500k per upgrade cycle—without a clear revenue stream to sustain that investment.
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Steep Learning Curve: Onboarding new developers to Allo is hard. Its modularity, while powerful, introduces significant conceptual and technical complexity that limits adoption among newer teams.
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Rigid UX Patterns: Builders often found themselves constrained by Allo’s design assumptions. The inability to quickly stand up custom frontends or modify logic without deep context made it hard to move fast or iterate.
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Low Market Pull: Despite strong internal conviction, Allo Protocol has struggled to become a default choice in the broader ecosystem. Many developers now prefer to roll lightweight, app-specific logic using newer tools or frameworks.
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Disintermediation by AI Tooling: With the rise of AI-powered code generation and app scaffolding, Allo’s initial value proposition—simplifying complex allocation logic—is being eroded by faster and more intuitive alternatives.
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Lack of Sustainable Incentives: Attempts to monetize usage of the protocol (e.g., protocol fees) faced resistance. Without embedded incentive structures (e.g., a token or fee split), maintaining Allo becomes an altruistic public good with unclear funding.
Other Value Props
Beyond reusable protocol modules, Allo.Capital continues to offer additional valuable resources to builders engaged in on-chain capital allocation:
- Social: Leveraging community building to amplify impact and foster social schelling points around the design space.
- Intelligence: Providing insights, analytics, and strategic guidance on next-gen capital allocation dynamics.
- Distribution: Connecting builders with key stakeholders who will actually use their apps, increasing TVF (Total Value Flowed) through Gitcoin, bespoke intros, and other types of exposure.
Future offerings may include:
- Technology: Facilitating access to cutting-edge technologies and development tools to ease the pain and accelerate progress for app builders.
- Funding: Offering pathways and opportunities to secure funding and financial support.
Conclusion
Given these realities, we currently have no plans to pursue Allo Protocol 2.2 or Allo Protocol 3. Our strategic direction for the foreseeable future will focus instead on broader explorations in the category of next-generation capital allocation, which will then dive deep on specific niches where we think we can have an impact and generate revenue.
Possible Futures
While we’ve currently paused further development, several potential paths could emerge:
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No further development on Allo Protocol: Maintaining status quo and preserving existing implementations.
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Community-led development of Allo Protocol 2.2 or Allo Protocol 3: Empowering the community to take ownership and evolve the protocol according to user needs.
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Revisiting technological investments: Exploring completely new directions—tools that simplify the creation of crowdfunding apps, platforms focused on rapid scaffolding of decentralized apps, or integrations that leverage AI and vibecoding.
